Bitcoin ATM

On June 19, 2014, the Parliament of Canada approved the world’s first national law on digital currencies, and initiating the world’s first treatment in law of digital currency financial transactions under national anti-money laundering law.

A Bitcoin ATM is an electronic communications device that allows someone to exchange bitcoins and cash without the need for a human to facilitate the transaction. Some models only allow the purchasing of bitcoins for cash.

What you need to know about Bitcoin:

The five most important facts about Bill C-31 in relation to digital currencies (similar to Bitcoin) are as follows:

Regulates digital currencies as MSB – Digital currency dealing, more specifically referred to as “dealing in virtual currencies” in Bill C-31, will be subject to the record keeping, verification procedures, suspicious transaction reporting and registration requirements under the PCMLTFA as a money services business.

Does not define “dealing in virtual currencies” – The phrase “dealing in virtual currencies” was not defined and it is not known what the defined term will encompass in terms of transactions but the government has clarified that it will apply only to digital currency exchanges (“Digital Currency MSB“).

Registration with FINTRAC – Digital Currency MSBs will be required to register with FINTRAC and if successfully registered, to implement a complete anti-money laundering compliance regime.

Captures foreign Digital Currency MSBs targeting Canada – Bill C-31 extends to: (a) entities that have a place of business in Canada; and (b) entities that have a place of business outside Canada but who direct services at persons or entities in Canada. Digital Currency MSBs in Canada, however, that provide services to persons or entities outside of Canada are exempt from Bill C-31 for those external services.

Prohibits banks from opening accounts for Digital Currency MSBs if unregistered– Under Bill C-31, banks will be prohibited from opening and maintaining correspondent banking relationships with Digital Currency MSBs that are not registered with FINTRAC.

Report Suspicious Transactions

Digital Currency MSBs are required to report to FINTRAC every suspicious financial transaction and attempted suspicious financial transaction. There is no monetary threshold (i.e., dollar amount) that triggers the requirement to report a suspicious transaction.

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Federal Regulation

In the US, a Bitcoin ATM business is defined as a Money transmitter by the Financial Crimes Enforcement Network (FinCEN). As a Money Transmitter (a type of Money services business (MSB)), the business must comply with the rules set out by the Bank Secrecy Act (BSA). Responsibilities include establishing an AML program, appointing an AML compliance officer, and reporting suspicious activity to FinCEN. An AML program is a set of business rules that define how a business will comply with the BSA.

FINTRAC Regulation Plan on Bitcoin

In Canada, FINTRAC (Financial Transactions and Reports Analysis Centre of Canada) is working on a regulation plan for Money Services Businesses (MSBs) dealing in virtual currencies, a series of rules that will most likely come to force in 2015.

The Canadian financial regulator said that changes to the Proceeds of Crime and Terrorism Financing Act, a list of rules that facilitate combatting the laundering of proceeds of crime and combating the financing of terrorist activities, “will aim to cover entities such as virtual currency exchanges, not individuals or businesses that use virtual currencies for buying and selling goods and services,” according to an official publication issued on July 30.

Until the new regulations are drafted and in force, MSBs that need to register with FINTRAC are those that are engaged in the business of any of the following services:

Foreign exchange dealing: conducting transactions where one type of fiat currency is exchanged for another fiat currency;

Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or

Issuing or redeeming money orders, travelers’ cheques or other similar negotiable instruments.

What is Bitcoin?

History of Bitcoin

Bitcoin is an open-source digital currency created in January 2009 by Satoshi Nakamoto. An article by Time magazine claims that the currency can be exchanged “untraceably” between two people across borders, making it the world’s first distributed and anonymous currency. Bitcoins are generated by a computer algorithm from software that anyone can download and install on any computer. Once the Bitcoin software has been installed, a user can generate, store and directly exchange Bitcoins with others without the verification of a third party such as a bank or government.

The Most Powerful Person in the World of Bitcoin: Gavin Andresen

Gavin Andresen, a mild-mannered 48-year-old picked by the real Satoshi Nakamoto, whoever he or she is, as his successor in late 2010. Andresen became “core maintainer”—chief developer—of the open source code that defines the rules of Bitcoin and provides the software needed to make use of it. The combination of Nakamoto’s blessing and Andresen’s years of diligent, full-time work on the Bitcoin code has given him significant clout in Bitcoin circles and stature beyond. The CIA and Washington regulators have looked to him to explain the currency. And it was Andresen who conceived of the nonprofit Bitcoin Foundation—established in 2013—which is the closest thing to a central authority in the world of Bitcoin.

Formerly known as Gavin Bell, he has been a software engineer ever since he graduated in computer science from Princeton in 1988 and took a job with the Silicon Valley computing company Silicon Graphics. He worked there for seven years, and then at a series of startups building products from 3-D drawing software to online games for blind and sighted people to play together. Then he encountered Bitcoin in 2010.

Andresen launched a website in 2010 called the Bitcoin Faucet that handed out five free bitcoins to every visitor. (A bitcoin was worth only cents at the time but each one trades for $600 today; Andresen reduced the size of the handout as bitcoins rose in value, then shut the site down in 2012.) He also began sending code tweaks and improvements to Nakamoto. Bitcoin’s founder liked his work, and soon made his protégé’s e-mail address the only one on the project’s homepage. Andresen formally stepped forward in a December 2010 post on the Bitcoin forum. “With Satoshi’s blessing, and with great reluctance, I’m going to start doing more active project management for Bitcoin,” he wrote. He has worked full-time on it ever since. The Bitcoin Foundation paid him $209,648 in 2013—a salary he received in bitcoins.

He proudly reports that his wife, a geology professor, doesn’t refer to Bitcoin as “pretend Internet money” anymore. His kids became convinced last Christmas that their dad had been onto something after he used Bitcoin to pay for a white-water rafting trip in New Zealand.

The number of people working on the code remains small, even since Andresen helped establish the Bitcoin Foundation to support the software with donations from individuals and companies. But the software behind Bitcoin has never been more critical. As the currency has grown to be worth nearly $8 billion, its stakeholders have widened from the early libertarian enthusiasts to include investors on Wall Street and in Silicon Valley (see “Bitcoin Hits the Big Time”). U.S. lawmakers and regulators have spoken positively about Bitcoin and made efforts to regulate it (see “Regulators See Value in Bitcoin and Other Digital Currencies”).

(Only about one Bitcoin transaction is made per second today, but most people who own Bitcoin do so to speculate on its price, not to pay for goods or services). Visa processes almost 480 transactions a second worldwide and can handle up to 47,000 a second at peak times.

OTTAWA, July 30, 2014 – On February 11, 2014, Economic Action Plan 2014 announced the Government’s intention to introduce legislative changes and new regulations to strengthen Canada’s Anti-Money Laundering and Anti-Terrorist Financing Regime. Among other things, these changes will address virtual currencies.

On June 19, 2014, the Economic Action Plan 2014 Act, No. 1, received Royal Assent. The Act contained changes to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) that will entail new requirements for money services businesses (MSBs) dealing in virtual currencies.

The changes will come into force once regulations are published in the Canada Gazette.

The regulations will aim to cover entities such as virtual currency exchanges, not individuals or businesses that use virtual currencies for buying and selling goods and services.

Until the new regulations are drafted and in force, MSBs that need to register with FINTRAC are those that are engaged in the business of any of the following services:

Foreign exchange dealing (conducting transactions where you exchange one type of fiat currency for another fiat currency);

Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or

Issuing or redeeming money orders, traveller’s cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

Protected by US patent application 62/013,349 Trade-mark Application No. 1693363. United States Provisional Patent Application No. 62/072,142. Canada Mobile Payments name and logo are trademarks of CDN Mobile Payments Corp. Sitemap The Interac name and logo are trademarks of Interac Inc. Apple, the Apple logo, iPad, and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc. The Visa and MasterCard logos are trademarks of Visa International and MasterCard International Incorporated. Canada Mobile Payments is a pending registered MSP of Canada. New applicants are subject to conditions and approval of the application by Canada Mobile Payments and its partners.